The Social, Location and Mobile Guru

Menu

NZ Herald Landlords taking money we need

It’s soapbox time folks. Over the last week, there have been several stories in the NZ media about businesses complaining that people are investing in rental properties instead of buying shares and options in companies on the share market. The latest was in yesterday’s NZ Herald.

I take exception to their bleating and here’s why. Many years ago I worked for a company called RC Dimock as a divisional sales manager. A number of us got together under the guidance of the Financial Controller and formed a share club. We all put money in each week and collaborated on which companies we would invest in.

I really enjoyed it. I read every copy of NBR, charted the daily value of stocks, learned about all aspects of stocks and bonds and invested more in our own company, my employer when we were purchased by Anzon Investments. As time went on, I started investing independently, continued staying up to date with large reliable companies and punted on more risky investments in various industries.

I had my own broker and whilst my investments were not massive, I was young and suspecting that superannuation was not going to give me any sort of lifestyle, I was looking for ways to improve that situation when it came.

As well as Anzon, I joined many people who invested their life savings in NZ stalwarts including Brierley Investments, Carter Holt, Robert Jones and many other companies. Then came Black Tuesday and many Kiwis lost their entire retirement savings.

Friends and colleagues lost almost everything they had, whilst the senior managers of the public companies moved on and in many cases their old boys club helped them pick themselves up again.

When I got married and started a family, we bought our first modest home and gave up any form of lifestyle for a few years paying at times over 21% interest, but we were building some security. Other people’s poor business decisions and the economic climate were not going to take this from us, providing we were able to maintain the payments.

Subsequently I worked for a company which was embezzled by it’s CEO and lost 10’s of thousands of dollars in salary, commissions and a large company credit card bill that my boss had run up without my knowledge. I then learned what it means to get a company credit card and you sign a form in good faith saying that you are jointly and severally liable for a company credit card. The credit card company who were coincidentally owned by my bank told me that I could either pay for the company credit card, or they would sell my house and give me the change after the 9 month bill was paid.

Further in my career, when I was making a lot of money for my new employer of almost 7 years, I was made redundant when the company was sold, along with several of my colleagues and my MD. The decision was made on the basis of a spreadsheet looking only at what they were paying us, not the great success we were achieving, over budget in ebit and sales.

So forgive me for having a lack of faith in business as a way of protecting my future lifestyle if and when I reach retirement age.

I started learning about rental properties, LAQC company structures, negative gearing and tax benefits, in as much as being able to claim depreciation and costs against my personal income and invested in a rental property.

Some people thought I was rich because I had a rental property, but my own home remained modest and I was having to subsidise the rental to cover the cost of the 100% mortgage, i.e. I had zero equity. My first tenants were a young family with 4 kids. Sometimes they would call me and say they couldn’t make the rent and could they pay the following week. I was paying around $170 a week to top up the mortgage, because the rent didn’t cover it. Then there was property insurance, fixing appliances, calling in drainlayers when they tried to flush nappies and other unmentionables down the toilet. These are just a few of the issues I had, and if it wasn’t for the ability to recover some of these losses against my income tax I would have gone broke.

The family were never going to be able to buy their own home and didn’t take great care of mine. They couldn’t pay a rent that would cover my costs, market rents did not reflect the cost of owning property. My hope was that over time the property value would increase and I would recoup my losses.

The key to my rationale, which I still subscribe to, is that I was making my own decisions and having control in the level of risk I was prepared to take. I wasn’t going to have my safety net taken away by some entrepreneur who was travelling first class around the world, who was able to walk away and start again when he had spent all my investment savings.

Owning a rental property is a business. There is a need for rental properties. The Government has quit most of their State Housing stock and people who can’t afford to buy their own homes, around 35% of the NZ population, over 1.5 million people do not own their own homes. So who is going to take responsibility for them?

When people set up a public company and use our funds to run them and take risks with, we have no control over how they use our money. If things turn sour as they have for many Kiwis trying to invest their hard earned money, they walk away and set up their next business. Investing in public or private companies is high risk. For people who can afford that risk, great, enjoy. But most owners (think big mortgage) of rental properties are not wealthy people, they are just people trying to make sure they can afford a little lifestyle when they retire without being a burden on their family. It is not easy owning rental property and the odd example of someone who has built up a rental empire is the exception, not the rule. The majority are Mum’s and Dad’s who don’t want to live on a combined income of $478 a week.

Could you live on $478 a week including rent, power and phone? What would that give you for food? Forget entertainment. On the other side, there is the potential for people to live much longer than in previous years and with Baby Boomers, less tax payers to heklp support them.

If the Government wants us to invest in business instead of rental property, they should give us some security against the risk of public companies. Of course they will also have to invest in providing rental accomodation for the 35% of us who can’t afford to own their own homes. What are the odds of that? About the same as that of people who invested their life savings in Brierley Investment shares. Telecom shares anyone?

Yesterday we flew to Wellington and drove over the windy Rimutakas for a funeral of a friend and family member who died of cancer on Monday. It all started with a lump in her breast, it ended with tumors in her spine and brain. A prognosis of months became days. One of the people who […]

I have had feedback from many people that they are reading my blogs about my cancer journey and appreciation for my speaking out, when for many men this is a taboo subject. I really appreciate the feedback. It’s not exactly a comfortable thing to share. There are a couple of things I would appreciate even […]

Yesterday I had a day off between two holidays. I was going to go for a Fly Your Own Scenic Flight in a Cessna 162 at Ardmore, but the weather looked a bit dodgy and my car got trailered to an auto electrician in Pt Chevalier at lunchtime on Friday who said he was going […]

I’m writing this blog to ask for your help in raising awareness and fundraising for Relay For Life, to support the Cancer Society in raising funds they need both for cancer research and to support people who need help, from counseling to transport and even free accommodation when people have to travel out of town […]

So when my GP told me that my PSA levels had increased every test over the last couple of years when they should fluctuate, he said there was a risk that I might have cancer. He told me to lie up on the bed in his surgery, pull my pants down and my legs up […]

What a week I had last week, back to work blues, PSA blood tests for my prostate cancer and the usual agonising wait for yesterday’s meeting with my oncologist after my blood tests on Wednesday and more. So the visit was short and sweet, my PSA levels have gone down a little, without the help […]

Sort out your insurance before you get tested, so that you know you will be covered if you do get cancer. As some of my friends know, it’s a very expensive condition. One of my friends had to sell her house to help cover the costs of treatment because her insurance cover only paid for […]

If you have been following my recent posts you will know that I have decided to set up 150 values based activities or experiences to achieve in the next 5 years, having been told that I am now in remission from cancer. I have always been fascinated by lava. Living in New Zealand, I have […]

Do you know anyone with cancer, depression or other debilitating conditions? Do you suffer yourself? Perhaps, like me you have a health condition yourself; and like me want to create something positive out of it, including coping strategies and fighting to find yourself back. Would you like to be part of something that resonates with […]

I know you are a caring person wanting to make a difference like me, or you wouldn’t be reading this blog. I’m looking for advice and assistance on this project and I want to gift the results to the Cancer Society so that many people can benefit from it. Music is a great healer and […]